A look at oil production

Saudi Production Profile

Guest post by David Archibald

World conventional oil production peaked in 2005 and has been on a plateau at about that level ever since. This graph suggests that the market changed from inherent over-supply to inherent tightness in June 2004:

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Figure 1: World Oil Production and Oil Price 1994 – 2011

World conventional oil production will at some stage tip over into decline. That may be this year or it may be as late as 2015. The decline in US production began over four decades ago in 1970, as predicted by King Hubbert in 1956.

The next big one to tip over into decline will be Saudi Arabia. In determining what that will look like and its consequences, the first thing to do is a logistic decline plot of Saudi production history. Figure 2 shows the result:

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Figure 2: Saudi Arabia Logistic Decline Plot

Figure 2 shows that the Saudis have produced about half of their ultimate recoverable reserves. When half of a nation’s oil has been depleted, production rate decline is inexorable. From this plot, total ultimate recoverable reserves for Saudi Arabia are estimated to be 275 billion barrels. From this plot, Saudi Arabia is on the cusp of decline. So what will that decline look like?

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Figure 3: Saudi Arabia Conceptual Crude, Condensate and Natural Gas Liquids Forecast

This figure was produced by Euan Mearns in 2008. The red volume on the bottom right is the Ghawar Field and the green is the rest of the heritage super giants. The steep fall in projected Ghawar production from about 2012 would be due to an expectation that the field is watering out on its crest as shown in this figure:

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Figure 4: Two cross sections of a reservoir simulation of the northern part of the ‘Ain Dar region of the Ghawar Field

Figure 4 shows the progressive displacement of oil by water over the sixty years from 1940 to 2004. SW is water saturation. The reds are high oil saturation and the green shows where oil saturation is now down to about 50%. To recover further oil from the green areas requires enhanced oil recovery (EOR) tehniques such as carbon dioxide injection.

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Figure 5: Regional cross section through the Ghawar Field

This figure is from the American Association of Petroleum Geologists. The Ghawar Field is developed from a north-south trending horst block. It is 174 miles long by 16 miles wide. The producing horizon is the Arab D reservoir at about 7,000 feet.

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Figure 6: Saudi Arabia Production Profile 1938 – 2040

From the foregoing, Figure 6 shows the production profile generated for Saudi Arabia. The production decline is 3% per annum which amounts to about 300,000 bopd per annum from the current level. The world can cope with that, but will the Saudis?

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Figure 7: Saudi Arabia Population 1960 – 2040

Back in 1960, there were only about 4 million Saudis, now there are 27 million with population growth at 2.4% per annum compound. So, if the current trend continues, there will be 50 million of them by 2040. With population rising at 2.4% per annum and production falling at 3% per annum, we are starting with a net 5.4% per annum contraction in per capital oil production. The effect of that is captured by Figure 8 following.

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Figure 8: Saudi Arabia cash available per capita

The forecast in Figure 8 is based on the oil price running up to $200 per barrel by 2018 and then plateauing at that level. The Saudi Govt increased social welfare payments in response to the Arab Spring. As a consequence, their budget is just about break even at the current oil price. If social outlays aren’t increased further, they pontentially have a lot of cash to play with for the next eight years or so, though they are also propping up Yemen with whom they share a land border. The crunch point is reached about 2026 when income falls below constant per capita outlays. As a society and as individuals, Saudis will then find their standard of living falling by 7% per annum compound. None shall weep for them.

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Funny that all Peak Oil theorists always present future oil production at Saudi Arabia declining from exactly the point from where they make the prediction. This has been the case for ten years already. Mind you, being skeptical of PO theories is exactly what made me slightly think that I should be skeptical of every long-term predictions, like, Global Warming. PO theorists have been wrong for 3 decades now. Not that PO won’t “happen”, it just will be a complete non-event.

“The decline in US production began over four decades ago in 1970, as predicted by King Hubbert in 1956.”
Of course USA oil production has been increasing lately due to new technologies. We have cut our imports dramatically, with some predicting USA being energy independent in a decade or so.
The Malthusians have been wrong time after time, usually because of their ignoring man’s ability to solve problems. They also tend to think the world’s resources are flat instead of multidimensional: We not only have not yet explored the entire surface of the earth, but there is a whole new dimension in going deeper. A fourth new dimension is provided by improved extraction techniques. A fifth dimension is provided by increased efficiency in the use of resources. That is why man is unlikely to EVER run out of natural resources.
BTW: increasing world population provides more Eiensteins to solve problems.
Thanks
JK

Bill

Love your model projections David. I’m sure all the assumptions are spot on and that this is not just mental masturbation.

Ken Hall

There is also strong evidence that oil is produced from much deeper than we can drill, so on occasion, fields which have become depleted and then can refill from below and become productive again. I have not seen the abiotic oil theory destroyed either.

Tom

“Figure 4 shows the progressive displacement of oil by water over the sixty years from 1940 to 2004. SW is water saturation”
Does this imply that the “deserts will bloom” … water may be more valuable than oil in the Middle East… there has been talk of wars for water… Israel tried to control southern Lebanon for Litani River water and takes water from the Syria’s Golad Heights currently

A Lovell

jim says:
May 31, 2012 at 3:35 am
Well said Jim! I’m getting sick and tired of doom and gloom. Life is much more pleasant when one is optimistic. When you dig a little, most of these doomsday predictions never come to pass. We didn’t come out of the stone age because we ran out of stone!
As you say, the Malthusians have a very poor track record.

Dave Wendt

just a bit of contrary info
http://mjperry.blogspot.com/2012/05/bakken-2-oil-boom-comes-to-s-kansas.html
Bakken 2? Oil Prosperity Comes to South Kansas; Could Be Largest Economic Impact in State History
http://mjperry.blogspot.com/2012/05/oil-prosperity-update-for-eagle-ford.html
http://mjperry.blogspot.com/2012/05/center-of-gravity-in-oil-world-shifts.html
http://mjperry.blogspot.com/2012/05/new-frozen-frontier-awaits-offshore-oil.html
New and Frozen Frontier Awaits Offshore Oil Drilling in Alaska, Might Yield 1 Million Bbls/Day
North Dakota has increased production by close to half a million barrels a day

Garry Stotel

“World conventional oil production will at some stage tip over into decline” The key word is “conventional”…
And it will be a problem for SA more than for the World at large.

Jonathan Smith

A Lovell says:
May 31, 2012 at 3:58 am
The stone quote is a great one and very ironic as it is alleged to have been made by a Saudi oil minister in reference to mankind being unable to cope if oil ever ran out.

DirkH

jim says:
May 31, 2012 at 3:35 am
“BTW: increasing world population provides more Eiensteins to solve problems.”
Saudis?

Jim

The problem with using the the logistics curve to forecast is that one has to make an assumption of the total supply. The total supply keeps moving up over time, so that is why these guys are always off the mark.

Hollando

and in the long run, we’re all dead…

SMC

Jubail Industrial City, KSA is breaking ground on a major expansion called Jubail 2. This wouldn’t be happening if we (or the Saudi’s) were at ‘Peak Oil’. USA oil production, in the lower 48, is currently increasing due to the improved drilling techniques and ‘fracking’.

LazyTeenager

A Lovell says:
May 31, 2
When you dig a little, most of these doomsday predictions never come to pass.
—————
Neanderthals
Romans
Greeks
Macedonians
Persians
Egyptians
Mayans
Incas
Chinese dynasties many
Toltecs
Byzantines
Ottomans
Islam
British Empire
Amerindians
Zulus
I could go on forever about people who thought things would never end. But they did.
I bet the Romans figured those pesky barbarians could not possibly affect Rome. But they did. The biggest enemy is complacency.

SMC

Here is the address for the weekly EIA petroleum Status Report.
http://205.254.135.7/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/wpsr.html

Dave_G

Off-limits places for oil recovery (specifically Antarctica) will be opened as-and-when mankind needs it to be. NOTHING can stand in the way of mankind if mankind wants it.

Lazy Teenager, you should read Nassim Taleb. What will get our civilization is much more probably something that is simply unknown and unpredictable right now to us. To extend some trend lines from 1950-2000 to the future is simply ridiculous. His Saudi graphs telling a narrative on how in “2026” they will have a “problem” to solve is beyond silly.

Shevva

@LazyTeenager – What a staw man, so which of them ran out of resources? Islam?
Go back under your bridge.

Kaboom

Of course the definition of what conventional oil production means changes over time, so any continuity in the graph is really fictional. In the beginning it was lifted out of pits with buckets, after all.

tmtisfree

World conventional oil production peaked in 2005

Data don’t say so.

G. Karst

So will someone please explain why the cancellation of the US/Canada pipeline is a good thing? Seems like a crisis is being engineered and the POTUS is complicit. Why is so much alarm over CO2 if we are soon to decline in fossil fuels? GK

more soylent green!

There is more oil in the USA and the world than anybody ever dreamed of. Domestically, we lack the political will to exploit it.
Peak Oil is just another Malthusian fantasy, used by the technocrats to get more people to pay attention to them and exploited by the politicians to get more power.

Shoretower

The problem with the “peak oilies” is that they never seem to account for technological change in their forecasts. If technology gives us a new tool with which to search for oil, or a means to extract more from existing reservoirs, or a way to extract oil that is presently unextractable (fracking, for example), then the whole “peak oil” equation changes completely. US oil production is now rising, not declining. M. King Hubbert was correct, within the bounds of his assumptions.

Corey S.

It appears that the USA is sitting on the largest deposit of Oil Shale in the world, with about half of it recoverable. Equal to the entire world’s reserves.
GAO: Recoverable Oil in Colorado, Utah, Wyoming ‘About Equal to Entire World’s Proven Oil Reserves’

“The Green River Formation–an assemblage of over 1,000 feet of sedimentary rocks that lie beneath parts of Colorado, Utah, and Wyoming–contains the world’s largest deposits of oil shale,”Anu K. Mittal, the GAO’s director of natural resources and environment said in written testimony submitted to the House Science Subcommittee on Energy and Environment.
“USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions,” Mittal testified.

GAO Report
This type of oil has been extracted for some time, and very well since 1880 in some countries. So, personally, I wouldn’t categorize this as the GAO does as “unconventional” since Unocal had produces oil from oil shale before being losing its lease:

Unocal operated the last large scale experimental mining and retorting facility in
the western United States from 1980 until its closure in 1991. The company produced 4.5 million barrels of oil from oil shale averaging 34 gallons of shale oil per ton of rock over the life of the project.

I think its time we opened it back up. Also, where were the environmentally concerned citizens and congress then? I guess it was OK then, but not now when we really need it.

Mervyn

Peak oil theory is absolute rubbish, and oil companies know it.
Oil is not a fossil fuel but an abiotic. It is a natural product that the earth generates constantly rather than a “fossil fuel” derived from decaying ancient forests and dead dinosaurs. The depths at which oil is being drilled clearly puts the ‘fossil fuel’ label to bed.
Oil production will only decline if governments and oil companies want production to decline.
The only threat to oil will be the gradual adoption of hydrogen fuel for vehicles, planes and everything else in the future. When the motor vehicle industry e.g. starts making Fuel Cell Electric Vehicles powered by hydrogen (which can now be safely stored) demand for oil will start declining big time.

Bob Layson

Eco doomsters and malthusians used to say that every nation could not live like the U.S. Now they say that all nations shouldn’t.
They do not blink or acknowledge their shift. Very shifty.

John W. Garrett

It is very unlikely that there will ever be another Ghawar. That’s fact.
The rest of the assertions are SWAG ( a/k/a “Sophisticated Wild Ass Guessing” ). It’s always amazing to see what solutions arise in response to price signals. Applications of technology and innovation have historically extended original estimates of field and reserve lives.

Richard Lewis

WUWThis space and time-wasting drivel on this excellent climate change blog?

George V

Re: the statement about US Oil production decline beginning in 1970. Prior to 1980 the price of oil produced from shallower wells in the US was regulated in order to keep prices down. As what usually happens, production of oil was reduced. This changed in the early 80’s when oil price regs were eliminated. Oil production boomed to the point of causing a price collapse and subsequent reduction of production – it was so cheap it didn’t pay to drill. The environmental movement influence also impacted US oil production began to pick up steam around that time, leaving large tracts of land off-limits to drilling. As oil prices recovered there was limited drilling on federal lands. Now we see “slow walking” of permits to drill on gov’t lands or offshore, further limiting drilling.
Sum: The reduction in US domestic production is as much political as anything else. North Dakota and other new drilling is on private land.
George V.

Curiousgeorge

Personally, I agree with Douglas Adams prediction of a Vogon Constructor fleet paying us a visit before we ‘run out of fossil fuel’. So I am never without my towel. 😉

MarkW

Anyone who can’t tell the difference between a physical affect and a political affect, has no credibility when it comes to predicting oil production.
US oil production in the US peaked in 1970 because that’s what the politicians wanted, it had nothing to do with how much oil is left in the ground.

Vic H.

While there is justifiable skepticism expressed in the comments about long term forecasts in general and Peak Oil in particular, perhaps a better way to look at Peak Oil is that it predicts the end of cheap oil available from conventional reservoirs. With that definition, I believe that Peak Oil offers some very useful insights, particularly for the globally unique Saudi fields like Ghawar. While unconventional fields can add a lot of reserves, albeit at a lot higher finding cost than Ghawar’s couple of bucks a barrel, the unconventional fields cannot behave like Ghawar. Ghawar has been the global swing supplier for the last 30 years, a position that no other field currently can touch.
The loss of an almost instantaneous swing supply of a million barrels per day will have a huge price impact during periods of shortage. Look again at Figure 2 but change the scale from absolute oil volume to incremental excess supply and you can see why the oil prices have skyrocketed for small over volume changes. With Ghawar losing its swing capacity, the world is entering a brave new oil world.

Jimmy Haigh.

Mervyn says:
May 31, 2012 at 5:57 am
“Oil is not a fossil fuel but an abiotic. It is a natural product that the earth generates constantly rather than a “fossil fuel” derived from decaying ancient forests and dead dinosaurs. The depths at which oil is being drilled clearly puts the ‘fossil fuel’ label to bed.”
I was going to leave this alone – life’s too short – but I can’t. Absolute rubbish. Sorry.

Grey Lensman

Ideally peak oil production matches demand. It costs money to produce and store but is free in the ground. Add in strategic reserves and what we see is not “peak oil” but peak demand. Alternative fuels such as shale gas, natural gas liquids and others are having an impact on global aggregated demand as well as recession.
As we see with the low prices in USA for natural gas, due to difficulty in accessing international markets, the pressure on oi l price is down. The competition is fierce and unrelenting.

MarkW

LazyTeenager says:
May 31, 2012 at 4:52 am
Nobody is claiming that we will never run out of oil. We are ridiculing those who insist that we are running out now.

Wonder of wonders, even on NPR I heard a USGS report of 3 trillion barrels of oil on Federal lands with 1.5 trillion barrels being “economically feasible” to recover. It was also my understanding that, at present, the world’s largest oil producer was Russia. I also recall reading that the Saudis haven’t looked for oil in over a half century because they haven’t needed to. Want to make a prediction about what will happen when they need to?

Jonathan Smith

LazyTeenager says:
May 31, 2012 at 4:52 am
‘I could go on forever’…please don’t, anyway, you won’t be able to. According to your own hypothesis something unexpected will pop up and stop you. Hoist by your own petard young man/lady.

PeterF

I much appreciate this assessment, and I see it as a kind of ‘what if (fig1 – 7) then (fig8)’ scenario. Fig 8 is frightening, since a similar scenario outcome can most certainly be made for other oil countries.
However, it is contingent on the assumptions being right, and you were careful to say ‘conventional’ oil production! This does not take away from the severity of fig8, but I would love to see an extended scenario, which includes shale-oil and other unconventional hydro-carbons, and the impact of probably all countries in the world finding some of it on their own territory. Can you do it?

Gerard

@Jim, Alarmists are wrong. Yes they use Malthusian like arguments, but Matlhus himself was completely right. He only says that exponential growth based on limited resources is bound to collapse. Only discussion is about where the limits are and if we are able to bent down exponential growth ourselves. Archibalds article is pretty good at showing the limits and it appears responders here doesn’t like it at all. Even if Archibald is wrong in predicting the point of decline 10 or 20 years (which he isn’t) the principle remains true. Only if fossile fuel should magically regenerate out of itself as some respondents here seem to imply this wouldn’t be the case, but i hope we will not have to discuss such nonsense.

Jackstraw

David,
These charts are so outdated given the new dynamics in the oil industry, that you do an injustice in presenting them this way. For example, as little as 6 years ago the economic reserves estimates for oil in the North Dakota Bakken shale was less than 100 million barrels. Now there are estimates that 24 billion bbls will be recoverable from the Williston basin, and that is only 5% of the actual oil in place.
It is unrealistic to not anticipate that future technology will increase these recovery numbers even further. When predicting the future, if you don’t lead a moving target, you will always hit behind it.
The Bakken is only the first unconventional oil play that has applied the shale gas completion technology to low permeability oil resources, there are many more that are coming on line now and in the future across North America. But the geology in North America is not exclusively unique, much of this technology will be exported to the rest of the oil basins across the world.
If the US government could just get out of the way, stop blocking western federal lands and open up the offshore resources, North America could well be energy independent in the next 10 to 20 years.

theBuckWheat

We do not burn crude oil in our cars and airplanes, we burn fuel that is made by breaking down a feedstock of hydrocarbons into its constituent atoms and then reassembling them into the desired product.
The issue is only the cost of the fuel product, not the supply of crude oil. This is because the free market, supply will follow price. Many studies such as Barna’s report for the Office of the Secretary of Defense [1] show we are awash in hydrocarbons that could be converted into fuel. Barna’s study states the US has over 2x the hydrocarbons that all of Arab OPEC has. All we need is the will to allow the free market to work.
The issue for transitioning from whale oil to coal oil was one of cost when whales became scarce. Yes, new sources of crude oil are more expensive than sources we are presently extracting. But the market price of diesel fuel is now higher than the break-even costs of converting coal to diesel. The amount of natural gas coming on the market is so much that it has caused a big drop in the price. This also can be converted into liquid fuel. In fact, a firm in Carthage, Missouri used to convert meat scraps into biodiesel, that is until it went bankrupt. Even sewage sludge can be converted into liquid fuels. It is all only a matter of cost.
We all have all the fuel we want to pay for. And when some less expensive way to power our vehicles, aircraft and ships comes along, we will will adapt and transition to it just like our ancestors did with whale oil.
[1] http://www.westgov.org/wieb/meetings/boardsprg2005/briefing/ppt/congressionalbrief.pdf

North Dakota is producing more oil than Alaska, and is now the second largest oil producing state behind Texas. No signs of slowing down. In fact on of the limiting factors now is transporting the stuff. No pipeline!
Running out of oil has never been an issue.

Steven Kopits

I think WUWT is a bit off the reservation here. It’s like The Oil Drum writing about global warming.
Incremental capacity in Saudi Arabia looks to be viable at around $40 bn for 1 mbpd of capacity. This does suggest increased costs, but does not suggest an inability to increase production. Indeed, Saudi has increased production by 0.9 mbpd (900,000 barrels per day) to 10 mbpd in the last year. They’re not quite out of fire-power yet. The Saudis have stated a willingness to increase production to 12 mbpd, and I think most would consider this plausible, should the Saudis find it in their interest to do so.
Last year oil prices, in real terms, were at their highest level since the US Civil War. This suggests an acutely supply-constrained system. When peak oil will occur can be debated; that it will occur cannot. Since late 2004, the global oil supply has been unable to keep up with demand. EIA forecasts suggest a massive shortfall again in the coming 12 months. To meet demand, new technology and new geographies would be necessary. We would need at least 3-4 countries increasing production at the rate of the US shale oils in the Bakken and Texas to keep pace. Right now, we have only two major basins in the US and the Canadian oil sands providing the net increase in the oil supply for the global economy. Thus, it would appear unlikely that, unless shale or other technologies spread rapidly to other countries, the oil supply will keep pace with demand.
For those interested in a solid primer on the matter, see my 2009 article, “Peak Oil Economics”. http://www.douglas-westwood.com/files/files/474-PeakOilEconomics.pdf
For those interested in the oil supply and demand outlook, I recommend this conference on June 19th in New York. It has an excellent speaker line-up. I will be talking about the Arctic and deepwater outlook. http://oilsymposium.net/

MarkW says:
May 31, 2012 at 6:11 am

Anyone who can’t tell the difference between a physical affect and a political affect, has no credibility when it comes to predicting oil production.
US oil production in the US peaked in 1970 because that’s what the politicians wanted, it had nothing to do with how much oil is left in the ground.

Costs. The Sauds & there buddies have exceptionally low production costs, & of course they own the ground so they don’t have to pay leases & rights to third parties. Also, the Saudi EPA is probably a tiny bit weaker than the good ol’ USA’s EPA (America: #1 again!).

SteveE

Mervyn says:
May 31, 2012 at 5:57 am
Peak oil theory is absolute rubbish, and oil companies know it.
Oil is not a fossil fuel but an abiotic. It is a natural product that the earth generates constantly rather than a “fossil fuel” derived from decaying ancient forests and dead dinosaurs. The depths at which oil is being drilled clearly puts the ‘fossil fuel’ label to bed.
Oil production will only decline if governments and oil companies want production to decline.
The only threat to oil will be the gradual adoption of hydrogen fuel for vehicles, planes and everything else in the future. When the motor vehicle industry e.g. starts making Fuel Cell Electric Vehicles powered by hydrogen (which can now be safely stored) demand for oil will start declining big time.
———
Can you let me know at what point the Oil Companies tell their geologists this because they haven’t told me yet and I’m making all the exploration decisions based on the fact that it is a fossil fuel.

AlexS

“World conventional oil production will at some stage tip over into decline. That may be this year or it may be as late as 2015.”
Why such certainty?
No one knows, it depends of too many variables.

LearDog

What they said. Define ‘conventional’. Deepwater sure wasn’t conventional when compared to the 70’s, and drilling a horizontal well 1 mile deep and 3 miles long into a 10 meter zone wasn’t conventional 5 years ago. But we’re doing it now.
As to abiotic origin – there are these things called biomarkers. The molecular structures of the plants and algae that went into making the oil, condensate and natural gas. Not to mention the isotopic signatures. Disproved.
The argument on ‘filling the reservoirs from below’ is predicated on the assumption of the initial size of the accumulation. If the Gas-in-Place is poorly known (and assumed to be small) – the production that comes from that reservoir might seem like manna from heaven. Deus ex Machina kind of explanation….

jbird

No one ever discusses Herbert’s theory here, so I’m doubtful that it is really understood. It is not about running out of oil. It is about energy return on energy invested (EROEI). Once you reach parity you are done. That is why they stop pumping some oil fields even though there is still oil in the field.
Oil fields follow a production curve. Herbert realized that the same principle applies to world oil reserves that applied to individual fields. He knew that “easy oil” was disappearing and that eventually it would happen everywhere on Earth.
It’s time to find new sources of energy.

tomson

The volume of the outer 5 miles of the earth’s crust is about one billion cubic miles. The entire volume of oil used by the entire world in its history is about 40 cubic miles. The world presently uses about 1.3 cubic miles of oil a year. Just sayin’.

I’ll just make a small correction to this statement
There is more oil in the USA and the world than anybody ever dreamed of. Domestically, we lack the political will to exploit it.
There is more oil in the USA and the world than anybody ever dreamed of. Domestically, we lack the finanacial will to exploit it.
Peak anything is a financial question. Peak anything occurs when the cost of production exceeds the price people are willing to pay. I would note Hummer sales tanked when the price of a gallon of gasoline in the US went over $3.